An investor bought 100 shares of stock at a cost of $10 per share. He held the stock for 15 years and wants to sell it now. For the first three years, he received no dividends. For each of the next seven years, he received total dividends of $100 per year. For each of the remaining five years, no dividends were paid. In the last 15 years, the investor's marginal tax rate and capital gain tax rate were averaging about 30% and 20%, respectively. What would be the break-even selling price to earn a 15% return on an investment after tax?(a) $6,579 (b) $7,977 (c) $8,224 (d) $9,398

An investor bought 100 shares of stock at a cost of $10 per share. He held the stock for 15 years and wants to sell it now. For the first three years, he received no dividends. For each of the next seven years, he received total dividends of $100 per year. For each of the remaining five years, no dividends were paid. In the last 15 years, the investor's marginal tax rate and capital gain tax rate were averaging about 30% and 20%, respectively. What would be the break-even selling price to earn a 15% return on an investment after tax?(a) $6,579 (b) $7,977 (c) $8,224 (d) $9,398

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Question

Definition Definition Tax imposed by the government on the "gain" or increase in the value of an asset at the time of its sale by the owner. Capital gain is computed based on the purchase price and sale price of the asset. If the sale price of the asset is more than the purchase price, there is a gain on the sale of asset. A tax is imposed on such gain in accordance with the applicable tax rates at the time of sale.

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